In just three years, Xiaomi has taken the number one spot in smartphone sales in India, the company’s biggest market outside of China, displacing the long-standing leader, Samsung. Last month, two leading market research agencies -- Counterpoint and Canalys -- announced that Xiaomi has overtaken the South Korean giant in the last quarter of 2017.

Samsung disagrees. Asim Warsi, global vice president at Samsung, asserts that Samsung has been the market leader in India for the past six years and the number one brand in the smartphone segment for the past 24 quarters. Market research firm GfK too corroborates Samsung’s claim. As per GfK, Samsung had 43.4% value market share and 39% volume market share in Q4 2017.

Long time coming

But for many, the writing was on the wall for Samsung for some time now. Despite being a top choice for flagship Android smartphones, Samsung has underserved the budget and mid-range category in India -- the segment that makes the volumes in smartphone sales in the market.

Samsung has been unable to transform its budget portfolio. Many in the technology media have also ranted against Samsung sneakily launching older devices rebranded as new models, most of them with mediocre internals compared to the competition, including Xiaomi.

Of course, they still sell. Samsung has an enviable hold on the Indian consumer and despite the Galaxy Note 7 fiasco or the rise of Chinese smartphone players, the brand trust in Samsung as a global consumer electronics brand is infallible. Apart from the brand equity, Samsung’s strong distribution channel and wide after-sales service network have helped it to hold the fort to a certain extent amidst the onslaught from Chinese smartphone players like Oppo, Vivo, Huawei and Xiaomi.

Karn Chauhan, a research analyst at Counterpoint Research, too thinks that Samsung can bounce back as it still has the robust distribution reach and brand equity.

The growth of Xiaomi

A Mi Home in China. (Photo by Zhang Peng/LightRocket via Getty Images)

Building brand equity might be a long-term play, but Xiaomi is doing everything else to take a slice of Samsung’s pie as well as grabbing a big share of the new demand in the expanding smartphone market.

Starting its journey exclusively via online retail, Xiaomi had to cross over. With only one-third of smartphone sales in the country happening online, the company had to find a way to crack the offline market for a sustainable market share. In 2017, Xiaomi started to build its offline business aggressively with a three-pronged strategy involving large format retailers (where Xiaomi puts up a pop-up store at big electronics retailers), Mi Preferred Partner stores and its own Mi Home stores.

Mi Preferred Partner stores are key multi-brand retail stores in each market cluster which carry differentiated Xiaomi branding and get stock from Xiaomi on priority. While they continue to sell devices from other brands as usual, they get additional business by being an outpost for Xiaomi. With this model, later adopted by Motorola, Xiaomi is building offline retail without going for the breadth and reach associated with traditional distribution.

Once very proud of spending very little on marketing, Xiaomi is a convert now. Last year saw large spends in outdoor advertising, television commercials and signing up a leading Bollywood actress -- Katrina Kaif -- as its brand ambassador. The huge market spends of Samsung was ceasing to be an advantage anymore.

All not over for Samsung

Canalys’s Rushabh Doshi though doesn’t think it’s all over for Samsung. “Their hold on the supply chain, more importantly, memory and their R&D prowess will enable them to fend off Xiaomi’s attack,” asserted Doshi in one report.

While Xiaomi has relied on the lucrative budget to mid-range segment, they haven’t been able to carve out space in the premium to ultra-premium category (a territory that Samsung is more comfortable in). The Mi MIX 2 launched last year didn’t make a big splash, for example.

Also, Samsung is the only player in the market that caters to the entire spectrum of smartphone buyers in India.

David versus Goliath

The fight for the number one spot has just started, and the winner, in the end, will be the one who wins the maximum quarters -- short bursts notwithstanding -- piggybacking on a successful triumvirate of innovation, distribution, and after-sales support.

Samsung is unrelenting, but Xiaomi has made its intentions clear. The box of the just-released Redmi Note 5 has a small sticker on the front that says, "India’s Number 1 Smartphone Brand."

I write on consumer technology trends, gadgets, and small and medium businesses, and have over a decade of experience – both as an industry watcher as well as a participant. As a columnist for several international publications, I offer an Indian perspective to a global aud...